Sinkhole concerns keep condo residents from homes

Nov 9, 2010

The following article was published in the Tampa Tribune on November 9, 2010:

Sinkhole concerns keep condo residents from homes

By Keith Morelli

It’s been four months since a 25-foot wide, 40-foot deep sinkhole opened at the foot of the Bordeaux Village condominium building forcing a dozen families out of their homes. They still aren’t allowed back in the building because of safety concerns.

The reason for the exile: A squabble between the homeowner’s association and the insurance company that covers sinkhole damage to the building. It’s a dispute that won’t be solved any time soon, said Marielle Westerman, an attorney for the Bordeaux Village Homeowners Association.

That could mean some residents, now paying for temporary lodging on top of mortgages for a home they can’t get to, may lose their property.

Westerman said the conflict is over what needs to be done to stabilize the ground beneath the building and who’s going to pay for it. The situation is becoming more commonplace these days, as claims for sinkhole damage rise in Florida.

The gaping hole at Bordeaux Village has been filled with tons of rocks and sand, and the insurer, says that has fixed the problem, but Westerman said more needs to be done to make sure the building is safe.

She said the insurance company has refused to perform additional testing, even though engineers working for the association say more tests are needed, tests that are more comprehensive – and costly.

“The association can do the testing itself, but it’s expensive,” she said. “We don’t have that kind of cash.” The insurance company is required to perform and pay for those tests, she said.

“They can handle that type of cost,” she said. “The problem is our engineers say it’s incredibly costly to try to fix this building and the insurance company hasn’t ponied up the cash necessary to do those repairs. We are just in a stalemate with them.”

American Coastal insurance company, based in Davie, covers the condominium. A company representative could not be reached for comment today.

Westerman is asking the state to force the insurers to pay for a permanent fix.

“You cannot leave that area unattended,” she said, “and think you have stabilized that building.”

As the struggle continues, Westerman predicted some condo owners may be foreclosed upon.

“This,” she said, “is a very sad situation.”

She said the insurance industry can get away with denying claims in Florida because government regulation on that front is lax.

“Five years ago, it wasn’t like this,” she said. “Insurance companies didn’t have the same sway over the Legislature and the (Florida) department of insurance regulation.

“I’m sure there have been marginal claims,” she said, “but I think the state can do a better job of regulating public insurance adjusters.”

The insurance industry has reported a spike in the number of sinkhole claims made in Florida over the past few years. Sinkhole claims doubled for the state-backed Citizens Property Insurance Corp. between 2005 and 2009, state officials say.

The jump has resulted in Citizens tweaking its coverage, creating a separate sinkhole coverage category. Citizens’ clients who live in sinkhole prone counties such as Pasco and Hernando can still get coverage, but they will have to pay premiums amounting to 10 percent of the insured value of their homes.

The Florida Office of Insurance Regulation has asked insurers in Florida to send in the number of claims they received; the amount of payouts and how many times claims had been denied or contested in court. Those statistics are expected to be released next week.

For many homeowners filing claims, the path to recovery may be difficult, as some insurance companies balk at paying such claims even though they collect an added premium to insure a home against sinkhole loss. Attorneys who specialize in sinkhole litigation say business for them is booming.

Tampa attorney Kirk Gibbons said his sinkhole clients are exclusively homeowners trying to collect on claims for sinkhole damage.

He said he is skeptical about the data that currently is being collected by the state, because, “it’s all from insurance companies.” He said the state also should have sought information from “the poor folks out there with problems with their homes. They are the ones they should be asking for data.”

What will become of the numbers collected by the state remains unclear, Gibbons said. He hoped it would not find its way into legislation down the road that will make it more difficult for homeowners to collect on legitimate claims.

“It seems to me the courts are the proper forum to sort these things out,” he said, “rather than some legislative committee or even the department of insurance.”

Litigation comes after insurance companies deny claims, he said. By law, insurance companies are required to hire geological engineering firms to find out if damage is caused by a sinkhole. Gibbons said those findings are always disputable because those firms work for the insurance companies.

“They do the testing and more often than not,” he said, “they are going to find no sinkhole.” Rather, he said, the blame usually is placed on shifting limestone deposits or some other geological phenomenon that is not addressed in the policy.

Though the Florida Office of Insurance Regulation has noted an increase of sinkhole claims over the past few years, officials there say many of those claims are the result of damage caused by settling or shifting earth and not sinkholes.

There is a lack of statewide records regarding sinkholes and the call for data is an attempt to document damage done by the craters. The data collected by the office will take a look at the frequency, severity and validity of claims, as well as where they’re coming from.

A sinkhole is specifically defined. They form when the layer of sand or clay over an underground void gives way and the surface ground collapses. Most of Florida sits atop limestone that is vulnerable to sinkhole formation as rain and underground aquifer flows dissolve the bedrock and create voids that can grow into vast underground cave systems.

Much of the Tampa Bay area is especially susceptible to sinkholes, from slow-forming depressions to yawning cavities such as the one that opened July 11 at Bordeaux Village.

Josh Burnette, an attorney in Tampa who specializes in sinkhole litigation, said he has no shortage of “homeowners who have sinkhole coverage and a failure by the insurance company to honor its contractual obligations in the policy.

“Anytime you’ve got insurance policies,” he said, “there is room for disputes between insurance companies and the insured

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